Home loans for low income earners

Low income earners find it harder to get home loans. But it's not impossible, depending on your budget and deposit size.

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Richard Whitten

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Key takeaways

  • It's harder to get a loan as a low income earner but it's not impossible. Your success depends on factors like your spending, existing debts and how much you want to borrow.
  • While there are no specific low income home loans, you can increase your chances of approval by improving your credit score, paying off debt and cutting your spending before you apply.
  • Lenders may accept Centrelink payments as a form of income but it likely won't be enough by itself.

How much do I need to earn to qualify for a home loan?

The amount you can borrow depends heavily on your income. But it also depends on:

  • Your deposit size.
  • Your property's value (and how much you want to borrow).
  • Your existing debts.
  • Your credit score.

When you apply for a loan, lenders evaluate the amount you can borrow by looking into your capacity to repay. The amount of money you have in your bank account is a factor, as it shows that you can save money despite your expenses (daily expenses, utility bills, other loan repayments, etc.).

Start by using a borrowing power calculator to get a rough idea of how much you could borrow with your income.

Compare cheap home loans

What income sources qualify for a home loan?

Income from a full-time job is what lenders really want to see. Even if you're a low earner.

But lenders may accept different financial sources when evaluating loan applications. Aside from having a job, receiving rental income, or regular government payments, lenders also look into allowances such as Centrelink payments, child support payments and pensions. Provide proof of these sources to submit with your application form.

What income documents will lenders expect?

Traditional loan applications require several documents:

  • Proof of your identity (passport, birth certificate, citizen’s certificate, driver’s licence, and in some cases, credit cards).
  • Proof of your income (recent payslips, letters of employment, tax assessments).
  • Your Australian Tax File Number.
  • Proof of residence (utility bills, recent bank statement, rate notice, valid driver’s license with photo).

If you are self-employed, you need to provide both personal tax returns and business tax returns for the past two years, and your balance sheet and profit and loss accounts for the same period.

Contractors need to provide their most recent employee contract that includes their income details. If you are earning any other income, such as from rent or through government benefits, you will need to present proof of that too.

Tips when applying for a home loan with a low income

You can increase the chances of being approved for a home loan, even on a low income. Here are a few options to think about:

  • Joint application. Consider applying for a loan with your partner or a co-signer. This combines two different income sources, raising your capability to repay the loan. It also takes into consideration the financial history of both borrowers, so be sure you both have good credit histories.
  • Borrow less. The lower the amount you apply for, the bigger the chance of it being approved. This is because it's less of a risk to the lender, and the lower loan size means lower repayments that are more likely to fit within your budget.
  • Lessen existing liabilities. Lenders look not just at your income, but also at your other financial activities. The few liabilities or less outgoing cash flow you have, the more of your income you can comfortably devote to home loan repayments.
  • Save a larger deposit. Low income earners can get a better chance of approval if the amount of money they have deposited in a bank account is high. A larger deposit indicates less money is needed, which means a lower income can suffice. It also shows the lender that you have financial discipline and you can pay back your loan on time.

Read our essential tips on how to increase your borrowing capacity

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Senior Money Editor
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Richard Whitten is Finder’s Senior Money Editor, with over eight years of experience in home loans, property, credit cards and personal finance. His insights appear in top media outlets like Yahoo Finance, Money Magazine, and the Herald Sun, and he frequently offers expert commentary on television and radio, helping Australians navigate mortgages and property ownership. Richard started his career in education and textbook publishing in South Korea. He holds multiple industry certifications, including a Certificate IV in Mortgage Broking (RG 206) and Tier 1 and Tier 2 certifications (RG 146), as well as a Bachelor of Education from the University of Sydney and a Graduate Certificate in Communications from Deakin University. See full bio

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Richard has written 764 Finder guides across topics including:
  • Home loans
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34 Responses

    janine's avatar
    janineApril 1, 2016

    we are moving interstate, and have a large deposit of 300.000 , we need an extra 80.000 and my hubby will leave work as settlement has reached of our house sale and like to buy a house interstate for 380.000 will the banks lend us the money if my husband is out of work and our income will only be centrelink and newstart allowance.

      Belinda Punshon's avatar
      BelindaApril 4, 2016

      Hi Janine,

      Thanks for reaching out.

      Generally, it will be harder for you to qualify for a home loan if your husband is currently out of work and if you’re currently receiving Centrelink benefits. When applying for a home loan, most lenders prefer that all applicants have been in their current job for at least 12 months, or in the same industry for 2 years, as this demonstrates that you have a stable source of income.

      You might be interested to read our page about home loans for Centrelink recipients where you can enquire with a mortgage broker to discuss your options. In the table provided, you’ll see which government benefits are accepted by most lenders, but please keep in mind that most benefits are only accepted as a secondary income source.

      We also have an article that explains how you can refinance and/or apply for a home loanonce you have started a new job.

      Ultimately, your ability to qualify for a home loan will depend on a range of factors; your joint income, assets, credit history, and any existing debts that you have (e.g. credit cards or personal loans). Also, most lenders will treat these types of applications on a case-by-case basis.

      I also suggest you to get in touch with a licensed mortgage broker. A broker can help you understand your financial position and they can leverage their panel of networks to find a lender that’s more inclined to review your application.

      All the best,
      Belinda

    peter's avatar
    peterOctober 15, 2015

    after i sell my home i will have around $680,000 as a deposit, i would like to borrow around $120,000 to buy another home. my wife and i are both unemployed and together we earn about $27000 from centrelink per year, can we still borrow money from a lender, we could easily pay back 1000 a month.

      Marc Terrano's headshotFinder
      MarcOctober 15, 2015Finder

      Hi Peter,

      Thanks for the question.

      While some lenders will use some or all of your Centrelink income when deciding whether or not to approve your home loan, your eligibility will depend on the lender’s requirements. You might want to contact a mortgage broker to see if there are any lenders who would likely approve your application or alternatively speak to a lender directly to find out what your chances would be.

      I hope this helps,
      Marc

    April's avatar
    AprilOctober 9, 2015

    Hi my name is April
    My husband Jamie n I have a mortgage of 84000.00 and wish to refinance our home to do renovations we were wanting to know how much we can borrow!
    Thank you

      Marc Terrano's headshotFinder
      MarcOctober 12, 2015Finder

      Hi April,

      Thanks for the question.

      You can get an estimate of the amount you can borrow by using our borrowing capacity calculator. For a more accurate estimation of how much you can borrow, please speak to a lender you are interested in to see what amount are they comfortable lending you.

      Before applying for a loan, please ensure that you meet all the eligibility criteria and read through the details of the needed requirements as well as the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you.

      I hope this helps,
      Marc

    meg's avatar
    megApril 20, 2015

    I am 65, have $25,000 deposit and looking at buying within $120-130,000 range in rural area, can I get a loan at my age and for what period would I be needing to take it

      Jodie Humphries's avatar
      JodieMay 8, 2015

      Hi Meg,

      Thank you for your question.
      Because each lender is different, the maximum age restrictions may differ depending on the lender. Lenders will also take into account your other financial factors such as your income, assets and debts when deciding whether to grant you a loan.
      I would suggest contacting a mortgage broker or financial advisor to discuss your specific circumstances and they will be able to assist you in securing a loan.

      Regards
      Jodie

      deepak kumar karmakar's avatar
      deepakJune 9, 2015

      I am retaired persons my monthly pension only $ 16000.00 but I need home loan how it will be get.

      Belinda Punshon's avatar
      BelindaJune 9, 2015

      Hi Deepak,

      Thanks for your enquiry.

      You can read more about home loans for pensioners and contact a mortgage broker to discuss your options.

      Lenders have different eligibility criteria regarding loans for pensioners, but ultimately they will assess whether or not you can service your loan using your pension benefit.

      Thanks,
      Belinda

    irini's avatar
    iriniMarch 26, 2015

    my husband is a joint tenant with his fathers house does that help with home loan application

      Shirley Liu's headshotFinder
      ShirleyMarch 26, 2015Finder

      Hi Irini,

      Thanks for your question.

      If your husband has a stable income, a good credit history and a large amount of assets then this generally helps with the home loan application.

      Cheers,
      Shirley

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